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Posted on Thursday, June 15, 2017

New Executive Orders and Laws May Not Impact Your Existing Contracts

Government contractors trying to cope with the current flood of executive orders being issued by President Trump must remember that these changes generally do not rewrite their existing government contracts. Although the President may sign new Executive Orders, the terms and conditions of an existing contract do not automatically change. A “deal is a deal” even with the government.

Existing contracts generally also remain unchanged by new laws passed by Congress and new regulations adopted by federal agencies implementing these new laws. What is especially interesting about the impact that new statutes and regulations have on government contracts is the long delay between the time the Congress passed these laws and the time they affect government contracts. For example, in 2010, Congress passed and the President signed the Small Business Jobs Act that changed small business set-asides. The SBA adopted final regulations implementing these changes in 2013. In December 2016, the FAR Council issued proposed changes to FAR implementing the SBA regulations. To date, no final FAR changes have been issued.

The fact that new laws are not instantly applicable to existing contracts may seem especially strange to experienced contractors familiar with the various FAR Changes clauses that allow the government to make unilateral changes to existing contracts. Those clauses, however, do not allow the government to unilaterally rewrite a government contract. The standard FAR Changes clause in a non-commercial item contract typically allows unilateral changes to the contract’s drawings and specifications but the terms and conditions are generally considered not part of the contract’s “specifications” subject to the Changes clause. New FAR clauses can, of course, be inserted into non-commercial item contracts if the contractor receives consideration.

Nor can the government unilaterally change the terms and conditions of a commercial-item contract. The standard Changes clause in those contracts requires both the government and the contractor to agree to any changes. Again, new FAR clauses can be inserted into commercial item contracts if the contractor receives consideration.

What are the rules for FAR clauses in a pending solicitation? According to FAR, new FAR regulations generally apply only “to solicitations issued on or after the effective date of the change.” FAR 1.108(d)(1). New FAR provisions, however, can apply to a solicitation if they were in a solicitation issued before that effective date and the contract was awarded after that effective date.

This “effective date” rule is also followed by the SBA. The SBA regulations in effect on the date the government issues the solicitation are the applicable SBA regulations according to the SBA’s Office of Hearings and Appeals. Size Appeal of VMD-MT Security, LLC, SBA No. SIZ-5380 (2012).

Finally, the Executive Orders issued over the past several years also focus on the date a solicitation was issued. For example, Executive Order 13658, Establishing a Minimum Wage for Contractors applies to contracts for which the solicitation was issued on or after January 1, 2015.

Bottom line: although you have to pay close attention to this deluge of changes because they affect your future contract opportunities, retroactivity should not be a concern. The deal you have already made with the government stays unchanged.

Berenzweig Leonard is teaming up with Red Team Consulting for a monthly newsletter featuring upcoming contracts, key protest decisions, legal updates, events, and more. This post was published in the June 2017 Monthly Insights newsletter. For more information on how to sign up for Monthly Insights, please click here.